The fitness industry is flourishing & if fitness is your passion, then opening a gym might seem like an opportunity worth considering.
Gym profitability, investment, and factors that affect a gym’s profitability might be some questions right at the top of your mind.
Do not worry; we got you!
In this comprehensive guide, we have answered all the necessary questions that you may have regarding opening a gym, its profitability, cost, etc.
How Do Gyms Make Money?
Gyms make money from multiple sources, including:
Training Classes
As a means to increase profits, gyms offer group or personal training classes. These classes can be included in the membership fees, or they can be offered as an extra service.
Recently, there has been a major shift towards gym switching to an all-class business model, where they only offer group classes example, spin classes or HIT, etc.
Membership fees
Membership fees are the major source of income for gyms. In fact, according to PolicyAdvice, gym membership fees constitute 60% of a gym’s revenue.
Although the most common type of membership gives the members access to various amenities in the gym, many top-tier membership plans include extra services like access to nutrition plans, free training classes, etc.
Merchandise
Gyms can increase their revenue by selling activewear and fitness products offline or online. Targeting existing customers can be a great starting point for this.
Nutrition Planning
As people are getting centered more toward fitness, providing nutrition planning can be a great way for gyms and fitness centers to increase their revenue.
Gyms can offer nutrition planning along with consultation separately or in a package, making room for more income streams.
Online classes
A lot of people do not prefer going to the gym. Offering online gym classes can help you reach such customers allowing you to make more money.
The best part about this is that you can train multiple people at once in an online setting, or you can even do a one-on-one session and charge higher.
Pros & Cons of Opening a Gym
Pros of Opening a Gym
- High-profit margin
- Multiple revenue streams
- Scaling opportunity
- Daily exercise
- Rewarding work
- Gives an outlet to build meaningful connections
Cons of Opening a Gym
- External competition
- High overhead expenses
- Requires a commitment of time
- High employee turnover
- Finding the right supplier may take time
How Much Investment Is Required to Start a Gym?
If you dream of owning a gym, then you must be wondering how much does it cost to start a gym.
It can cost anywhere between $10,000-$70,000 to start a modest gym and can go up to $1,00,000+ for a high-end gym.
The cost varies depending on the size of your gym, location, rent, types of equipment, etc.
Although the initial investment may seem like a lot, if your timing and location are on point, it will take you only a year or so to reach break even.
What is the Average Cost of Gym Equipment?
Gym equipment costs $2,000 – $3,000 per piece on average if you go for buying new equipment. Buying used gym equipment can cost two-three times less.
Additionally, building a fully furnished gym with all the required equipment can cost you $20,000 – $100,000.
Here’s a breakdown of the average cost of different types of gym equipment:
| Type of gym equipment | Average price for new gym equipment | Average price for used gym equipment |
|---|---|---|
| Weight plates | $1.5 per pound | $0.5 per pound |
| Pre-Weighted Barbells | $100 per barbell | $50 per barbell |
| Dumbbells | $1,000 to $2,000 for a 10-piece set | $500 for a complete set |
| Adjustable Dumbbells | $200 to $500 | $100 to $200 |
| Power Cage | $800 to $1000 | $350 to $500 |
| Weight Racks | $200 to $500 | $100 to $200 |
| Benches | $100 to $200 | $40 to $80 |
| Exercise Bikes | $200 to $2,000 | $300 to $400 |
| Treadmills | $300 to $1000 | $150 to $600 |
| Stepmills | $2,000 and $5,000 | $1000 to $3500 |
| Ellipticals | $200 to $1,000 | $600 to $800 |
| Pull-Up Station | $200 to $500 | $100 to $250 |
| Cable Crossover Machine | $500 to over $3,000 | $200 to $2000 |
| Workout Mats | $20 to $100 | – |
| Kettlebells | $20 to $200 | – |
| Resistance Bands | $30 to $100 | – |
| Medicine Balls | $20 to $50 | – |
One-Time Cost of Opening a Gym
The one-time cost of opening a gym could vary depending on whether you are purchasing the property or not, the state you live in, your location, etc.
However, here’s what the average cost of different expenses would look like.
| Type of cost | Average price |
|---|---|
| Physical location | Up to $800,000 (if you purchase the property) |
| Gym equipment | $10,000 to $50,000 |
| Certifications | $500 to $800 per certification |
| Legal and processing fees | $9,000 |
| Licenses and permits | Varies |
| Insurance | $12,000 |
| Computer network and POS system | $550 to $2,300 |
| Remodeling & Building improvements | Varies |
| Signage | $20 |
| Advertising | $5,000 |
| Operating cash | $1,000 |
| Responsive website | $300 to $700 for the initial build |
| Miscellaneous gym supplies | $500 |
Monthly Cost of Running a Gym
Again, the monthly cost of running a gym would vary greatly depending on the type of gym model you have among other factors.
However, here are some average numbers for your reference:
| Type of montly cost | Average price |
|---|---|
| Mortgage or lease payments | Varies |
| Insurance | $12,000 |
| Equipment lease payments | $3,934 to $8,067 |
| Equipment repairs and maintenance | $25,040 |
| Utilities | $63,465 to $68,413 annually |
| HVAC maintenance | $500 annually |
| Cleaning supplies | $150 monthly |
| Employee wages | Varies |
| Internet service | $75 per month |
| Marketing | Varies |
| Self-employment taxes/Payroll taxes | 7.6% of individual income |
| Legal and professional fees | $200 per hour |
| Miscellaneous expenses | $1000 a month |
Overall, it can cost anywhere between $37,000 – $49,500 a month on average to run a gym with a minimum of twelve employees.
Different Types of Gyms & Their Profit Margins
| Type of Gym | Average Profit Margin |
|---|---|
| Traditional gyms | 10-15% |
| Boutique gyms | 20-40% |
| Yoga studios | 20-30% |
| Franchise gyms | 10% |
| Pilates studios | 20-30% |
| CrossFit boxes | 27% |
| Swimming pool and aquatic centers | 10-15% |
Are franchise gyms profitable? Are traditional gyms profitable? Are yoga studios profitable? As you can see from the table above, they all can be!
Among the different types of gyms, Boutique gyms have the highest profit margin, followed by yoga studios, pilates studio and CrossFit boxes.
How Much Does a Gym Owner Make?
According to ZipRecruiter, a gym owner in the U.S. makes $148,024 per year in revenue on average, with the top 10% making as much as $399,000 a year and the lowest 10% making $14,000 a year.
After deducting all kinds of expenses, the net income of the gym owner comes down to $65,000 – $75,000 annually on average, which is quite good.
The key figures make it clear that opening a gym is quite profitable.
Forecasting Gym Profits
In order to forecast your gym’s profit, you must find out the revenue and expenses first.
Profits = Revenue – Expenses
Forecasting gym revenues:
In order to calculate gym revenue, you simply need to multiply the total number of members in your gym with the membership fee.
So, for example, if there are 20 members in your gym and your gym membership costs $100 per month, then your membership revenue would be $20,000.
You can use the same method to calculate revenue from different types of streams that you have.
For example, if your gym also offers classes, then if 30% of your members also pay for 15 classes costing $10 each, then your classes revenue would be:
Classes revenues = Classes x Average class price = 100 x 10 x $20 = $20,000
Hence the total revenue of your gym comes down to:
Membership revenue + Classes revenue = $20,000 + $20,000 = $40,000
Forecasting gym expenses:
Similarly, in order to forecast your gym expenses, you have to take into account two types of costs:
- Variable cost: This is the kind of cost that grows in line with your revenue.
- Fixed cost: This includes the cost that is fixed in nature, for example, salary, rent, etc.
How To Find Out the Break-Even Point For a Gym?
The break-even point refers to the point at which your total revenue is equal to your total expenses. Or in simple words, it is the revenue amount that you must generate in order to start making a profit.
The break-even point can be calculated using:
Break-even point = Fixed costs / Gross margin
Let us assume your gym makes $40,000 a month and has the following cost structure.
| Operating cost | Variable vs. fixed | Amount |
|---|---|---|
| Staff | Fixed cost | $30,000 |
| Utility, janitorial services | Fixed cost | $5,000 |
| Rent | Fixed cost | $6,000 |
| Marketing | Fixed cost | $2,500 |
| Bookkeeping, other | Fixed cost | $1,000 |
| Total | $44,500 |
So in this case the break-even point would be:
Fixed costs / 97% = $46,000
This means that you need to make at least $46,000 in order to start making profit.
How To Build a Profitable Gym Model?
Ways To Increase Gym Profitability
Here are a number of ways in which you can increase gym profitability:
- Host bootcamps
- Sell merchandise
- Start a gym-wear clothing line
- Sell higher ticket packages
- Reduce expenses
- Offer health coaching and nutrition services
- Offer private training sessions
- Start a youtube channel
- Add upsells
- Offer massage therapy
- Increase prices
- Sell home fitness equipment
Wrap Up
Opening a gym is not easy, given the amount of investment and tough competition in the niche.
Gym profitability can be attributed to a number of factors, customer retention, and location being the biggest of them.
With the right strategy and planning, you can start a successful gym and earn $65,000 – $75,000 annually on average.
FAQs
What are the factors that affect the profitability of a gym?
Different factors that affect the profitability of a gym are:
- Membership fees
- Size the gym
- Number of employees
- Location
- Additional sources of revenue
- Cost control
- Target audience
- Marketing strategies
- etc.
What is the role of member retention in a gym's profitability?
Since membership revenue accounts for 60% of the total gym’s revenue, member retention is key in maintaining and increasing the profitability of a gym.
Is opening a gym profitable?
Yes, opening a gym could be extremely profitable in spite of tough local competition.
The key to opening a successful gym business are customer relations and retention, location, and pricing, among others.
How many members do I need for my gym to be successful?
Having at least a hundred members in your gym in the first year is a good sign, and reaching at least 300 members in the consequent years would turn your gym into a huge success.
What is the success rate of gym business?
According to Glofox, eight out of ten gyms close within the first year of business.
However, if you manage through the ups and downs in the first year of your gym business, then there is a good possibility of your gym’s failure rate decreasing.
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.